It has been eight years since the credit crunch and the economy is showing signs of recovery, but consumer growth remains moderate. While 31 million people are now in employment and wage growth has begun to pick up in the last months, the slow progress means that businesses face at least another two years of tough conditions.
Vanessa Henry, shopper insight manager at IGD, highlighted some of the trends affecting the retail sector. She explained how UK shoppers were highly sensitive to inflation, with 23% of them expecting food prices to fall in the coming year.
The IGD is a research and training charity providing an insight for the food and consumer goods industry. According to the latest survey it carried out, the average customer shops 24 times a month, using four different channels, with 90% buying from a supermarket and a convenience store.
“From an industry perspective, we call this multichannel retailing. For costumers, it’s shopping around,” she said. This means the convenience sector is facing a significant growth opportunity in the next two to three years.
“Future convenience will not look as it currently does – convenience retail will have to fight to maintain their reliance, co-ops included,” added Ms Henry. One of the reasons why consumers do not shop at convenience stores is the belief that they are more expensive than any other food and grocery channels. Work needs to be done to change this perspective, she said. The rise of Aldi and Lidl has also changed the channel, with the pair enabling consumers to shop locally and at good price. Falling inflation is also supporting spending power but deflation remains a threat to retailers across Europe.
Co-operatives will also have to get on board with online shopping, thinks Ms Henry. The IGD expects online to be the fastest-growing of the UK grocery market, doubling in value to £17bn by 2019. Already the number of shoppers using online has increased to 11%, from 6% four years ago.
“Technology is going to change the way in which we shop,” she said, adding that the supermarket industry has changed more in the last six months than last 30 years.
The trend of shopping around is leading to more growth within all UK grocery channels, such as online shopping. But retailers must focus on feeding into what shoppers are demanding.
“You can engage with customers on different channels. Customers want to be able to go to convenience stores and buy fresh products,” she said.
Click and collect is another big topic for retailers. “For a lot of people, particularly families, people with young children, click and collect is a fantastic way to do their groceries – they can keep an eye on their total budget and not go over it,” said Ms Henry. She added that co-operatives have a fantastic story to tell, but they need to make sure that they communicate these credentials to shoppers.